The Ugly Truth About Tax Prep Chains

It’s amazing that a large number of people have their taxes prepared by H&R Block, Jackson-Hewitt, Liberty Tax and other large tax preparation chains, when most of their preparers are unlicensed, seasonal and possess a minimal level of tax knowledge.

When reviewing tax returns prepared by the big chains, we find obvious errors on many of them. Perhaps it would be understandable, if they charged low fees, but many of them charge as much as the higher skilled licensed firms. The big chains are in fact very expensive, considering the level of tax knowledge possessed by their preparers.

A few years ago the Government Accountability Office (GAO) conducted a study which resulted in a report to Congress about the many errors made by chain preparers. The GAO sent undercover agents with two different tax scenarios to a total of 19 offices of 5 commercial tax chains. All 19 tax returns contained errors.

The big chains not only made errors when preparing tax returns, they also settled lawsuits for ripping-off their customers. A search of the internet will produce news headlines reporting that H&R Block, Jackson Hewitt, and Liberty have paid out millions of dollars in settlements for deceptive advertising and other unethical business practices. A few of the headlines are provided:

H&R Block multi-million dollar settlement in New York

January 4, 2010 – Attorney General Andrew M. Cuomo today announced a multi-million dollar settlement with H&R Block requiring the company to refund fees it charged to low-and middle-income customers nationwide who were enticed into purchasing its fee-laden and fraudulently marketed Express IRA product that was virtually guaranteed to lose money due to a combination of hidden fees and low interest rates.

Since 1990, Block has defended 22 class-action suits accusing the company of fraud, misrepresentation or breach of fiduciary duty.

Liberty Tax Service faces class action lawsuit

Jan 3, 2011, Columbia, SC (WLTX) – Liberty Tax Service was sued in a national class action for allegedly falsifying documents and ripping-off their clients in a scheme to increase profits by filing false, fraudulent or inappropriate forms.

Liberty Tax Service loses deceptive ad suit in California

June 22, 2009 (by WebCPA). Liberty Tax Service, the third largest tax preparer in the U.S., has lost a lawsuit over deceptive ads and marketing. The ruling requires the company to pay $1.16 million in civil penalties and $135,886 in restitution, according to California (former) Attorney General, Jerry Brown for selling refund anticipation loans with interest rates as high as 395% annually.

Former California Attorney General Brown also reached settlements with Jackson Hewitt in 2007 and H&R Block (settling for $4.85 million) in 2009 over similar claims.

January 31, 2011 (Parsippany, N.J.) PRNewswire. Jackson Hewitt, the nation’s #2 retail tax preparer service, has filed a lawsuit against H&R Block, the nation’s #1 retail tax preparer service, for making what it called “false, misleading and highly disparaging advertising claims” about the company. The lawsuit specifically focuses on H&R Blocks “Second Look” ad campaign. In the ad campaign, Block claims that they found errors in two out of three tax returns prepared by Jackson Hewitt.

Consider the irony here: error prone H&R Block claimed that they are more accurate than error prone Jackson Hewitt. We say that neither of these chain stores produce the quality tax returns warranted by the fees they charge when they employ unlicensed, seasonal preparers who possess minimal tax knowledge. They may actually cost their customers more by missing deductions, credits and tax opportunities.

Why settle for drive-through fast food style tax preparation, when you can build a business relationship with us. Our preparers are highly qualified, licensed, and available all year to answer your questions and provide strategic planning for the best tax outcome possible.